Government failures create a Greek class of working poor

The latest reports on Greek workers’ income make dismal reading.

More than one in three Greeks is at risk of poverty and social exclusion - the highest rate in the Eurozone and second-highest rate in the EU after Romania and Bulgaria (40pc) - the latest Eurostat figures reveal.

This is partly because of unemployment, which remains stubbornly high after an eight-year recession. By the official figures it stands at 23 percent, but a Labour Institute report, which also takes underemployment into account, puts it at 28 percent (compared to the Eurozone’s 9 percent).

The Labour Institute also highlights the second reason for Greek poverty risk: the fact that people are simply being poorly paid. Due to the weakness of the Greek recovery, new jobs are almost entirely part time, and underpaid. A third of full-time workers and one in four part-time workers are being paid an average of €397 euros, even less than minimum wage €431 per month) which is roughly the statistical poverty level (and this is already defined as a very low €4,500 per annum in Greece, compared to, say, €12,765 in Germany).

The Institute, Greece's main labour think-tank, blames low rates of investment. Given current rates, it says, Greek employment would reach pre-recession levels in 2033.

These readings underline how the medicine of austerity is still failing to produce notable results in Greece, long after Spain and Portugal graduated from their programmes and are now achieving higher rates of growth than the Eurozone average, while Ireland is approaching zero rates of unemployment.

It is true that thanks to austerity, Greece balanced its budget in 2014, but the recession produced by public spending cuts only ended this year, and the recovery is in the order of 0.8pc of GDP in the second quarter, failing to meet predictions of 2.7pc growth. 

Why is this? Partly because the Greek recession was deeper than those of other programme countries, wiping a quarter of the economy out; and partly because the Greek debt is known to be unsustainable, frightening investors away, and the Eurozone has been slow to reschedule it. But the answer also lies in the reluctance of Greek governments to challenge vested interests (with the exception of the Piraeus Port Authority, all of Greece’s major privatisations went to oligarchs), build an effective tax enforcement mechanism (the government’s conservative estimate of tax evasion from fuel smuggling, for instance, is €1bn), or to stimulate investment, exports and job creation.

This last is the most complex problem. It is partly due to the fact that banks cannot finance enterprise, because they have enormous levels of non-performing loans after years of dithering on governments’ part on how to dispose of these. Then there is the reluctance of governments to simplify procedures for opening and closing businesses, licensing and permitting, because that would involve staff cuts in the state – the country’s most influential client base. Third, there is the impossibility of offering tax cuts to businesses and consumers, because the combination of a bloated state and inefficient tax collection machinery mean high taxes for all. And finally there is the inability of most Greek politicians to comprehend how money is made, because few of them have worked in the private sector.  

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